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IN THE OCTOBER ISSUE...
GOOGLE TO BUY YOUTUBE FOR $1.65 BILLION
Business Week, Michael Liedtke, 10/10/06
OCT. 10 12:51 A.M. ET The founders of YouTube Inc. built this year's standout Web phenomenon by figuring out how to make online video sharing easier than ever.
What they hadn't yet figured out was making money from their site. Google Inc. took that problem off their hands Monday, by agreeing to buy the site for $1.65 billion.
The all-stock deal makes YouTube by far the most expensive purchase made by Google during its eight-year history. Last year, Google spent $130.5 million buying a total of 15 small companies.
Although some cynics have questioned YouTube's staying power, Google is
betting that the popular video-sharing site will provide it an increasingly
lucrative marketing hub as more viewers and advertisers migrate from television
to the Internet.
"This is the next step in the evolution of the Internet," Google Chief Executive Officer Eric Schmidt said during a conference call Monday.
YouTube will continue to retain its brand, its new headquarters in San Bruno and all 67 employees, including co-founders Chad Hurley and Steve Chen. Meanwhile, Google will continue to run a less popular video service on its own site.
The deal is expected to close before the end of the year.
"We are excited to have the resources to move faster than ever before," Hurley, YouTube's 29-year-old CEO, said during a Monday interview.
Schmidt thinks so highly of Hurley and Chen, 28, that he compared them to Google's now 33-year-old co-founders, Sergey Brin and Larry Page.
Brin sees the similarities too. "It's hard to imagine a better fit with another company," Brin said during Monday's conference call. "This really reminds me of Google just a few short years ago."
The two companies even share a common financial bond: Sequoia Capital, an early Google investor that owns a roughly 30 percent stake in YouTube. Menlo Park-based Sequoia remains a major Google shareholder and retains a seat on the company's board -- factors that might have helped the deal come together after just a week of negotiation.
YouTube has drawn less flattering comparisons to the original Napster, the once-popular music sharing service that was buried in an avalanche of copyright infringement lawsuits filed by incensed music companies and artists.
While most videos posted on YouTube are homemade, the site also features volumes of copyrighted material -- a problem that has caused some critics to predict the startup eventually would be sued into oblivion.
But Hurley and Chen have spent months cozying up with major media executives in an effort to convince them that YouTube could help them make more money by helping them connect with the growing number of people who spend most of their free time on the Internet.
As its negotiations with Google appeared to be near fruition, YouTube on Monday announced new partnerships with Universal Music Group, CBS Corp. and Sony BMG Music Entertainment. Those alliances followed a similar arrangement announced last month with Warner Music Group Inc.
The truce with Universal represented a particularly significant breakthrough because the world's largest record company had threatened to sue YouTube for copyright infringement less than a month ago.
While Google has been hauling away huge profits from the booming search market, it hasn't been able to become a major player in online video.
That should change now, predicted Forrester Research analyst Charlene Li. "This gives Google the video play they have been looking for and gives them a great opportunity to redefine how advertising is done," she said.
Investors applauded the prospect of an acquisition as Google Inc. shares climbed $8.50 to close at $429 on the Nasdaq Stock Market, then added another $2 in extended trading, after the deal was announced.
Several other suitors, including Microsoft Corp., Yahoo Inc. and News Corp., reportedly had discussed a possible YouTube purchase in recent weeks.
"This deal looks pretty compelling for Google," said Standard & Poor's analyst Scott Kessler. "Google has been doing a lot of things right, but they are not sitting on their laurels."
Google's YouTube coup may intensify the pressure on Yahoo to make its own splash by buying Facebook.com, the Internet's second most popular social-networking site. Yahoo has reportedly offered as much as $1 billion for Palo Alto-based Facebook during months of sporadic talks.
"Yahoo really needs to step up and do something," said Roger Aguinaldo, an investment banker who also publishes a dealmaking newsletter called the M&A Advisor. "They are becoming less relevant and looking less innovative with each passing day."
Selling to Mountain View-based Google will give YouTube more technological muscle and advertising know-how, as well as generate a staggering windfall for a company that was running on credit card debt just 20 months ago.
To conserve money as it subsisted on $11.5 million in venture capital, YouTube had been based in an austere office above a San Mateo pizzeria until recently moving to more spacious quarters in a neighboring city.
Since the company started in Hurley's garage in February 2005, YouTube has blossomed into a cultural touchstone that shows more than 100 million video clips per day. The video library is eclectic, featuring everything from teenagers goofing off in their rooms to William Shatner singing "Rocket Man" during a 1970s TV show. Most clips are submitted by users.
YouTube's worldwide audience was 72.1 million by August, up from 2.8 million a year earlier, according to comScore Media Metrix.
Li and Kessler expect even more media companies will be lining up to do business with YouTube now that Google owns it.
"It's going to be like, 'You can either fight us or you can make money with us,'" Li predicted.
BEYOND RESPONSE: HOW SEARCH BUILDS BRANDS
SearchViews Blog, 09/26/06
Search has historically been viewed as a direct response channel, but it should be considered as the integration point between all medias, on and offline. People go to search box for information about stuff they’re interested in, which creates a unique opportunity for marketers to engage in a search dialogue with the user.
Moderator Peter Hershberg began the session with a question: How has the role of search changed in marketing?
David Karnstedt of Yahoo! Search Marketing replied, A lot of best practices today integrate campaigns between different types of media. Yahoo! is trying to get smarter in how search is integrated into overall marketing strategy, to better serve their variety of clients. Steve Kaufman from Digitas, agreed with David’s remark and followed up with comments about the importance of connecting TV ads to optimized pages. Ad-specific microsites provide people with the information they’re looking for about promotions they see offline. Bob Hyeman of Mediasmith analyzed search as a basketball game, in the sense that search can help people “tip the ball in the basket” when searchers aren’t exactly sure about what they’re looking for. This is an important thing for branding, because search can subtly reinforce brands by presenting them as relevant to a search query.
Curt Hecht from GM Planworks said that he’s interested in how his clients are increasingly embracing search. For example: His company timed the Oprah/Pontiac show to correlate with launch of Pontiac’s search campaign. Paid search was used to promote a microsite set up to provide more information about the episode. This is one example of how they’ve done “drafting” - buying against ad campaign terms – which speaks to a search-oriented mindset, aka, “how do we include search in the creative campaign?”
Peter mentioned the Reprise Media search marketing Score Card that looks at how superbowl advertisers integrate search into their ad campaigns.
David referenced a case study that used search to stimulate a viral campaign - showing that beyond branding, search is being used as medium to educate consumers. Curt noted that this speaks to information-rich categories (ie: automotive). Peter commented that while search provides an opportunity to engage users who aren’t necessarily looking for your product, it can at the same time have an adverse effect if users aren’t responding correctly to the ads. This is especially pertinent to campaigns in paid search that are for generic terms related to an overall campaign. Paid campaigns might not be relevant 6 months after broadcast ads are done, for example, and might be wasted money.
So, peter asked, Is this truly “branding”?
David responded, “A lot of it has to do with understanding user behavior.” People trust search results, and so if your brand appears in SERPS, its positive branding. For example, he noted that in product recalls, people use search to gather critical information. When you take that critical information and apply it to your brand message, you can gain back some user trust. Steven remarked, “its more about brand engagement – something at Digitas that we call ‘active branding’ – which is buying keywords that push your brand out there to people who didn’t think they were looking for it." Curt referenced Oprah again, saying that Pontiac looked at the user's search experience - Where can people go? Positive sites? Negative sites? How should they use their individual dealers involved in boosting organic search rankings of main site (Pontiac.com)? How can they take advantage of local markets to support brand message? Steven made the point that just provoking people to talk about the brands is a point of engagement, and has value with or without clicks. David continued by discussing how marketers want to control the full user experience when they type in brand names. To which Peter asked, “Are there ways that new ad channels are being integrated into search marketing campaigns?”
David said that Yahoo! is looking at relationships between differnet ad formats to better understand the nuances between their varieties. Bob said that Mediasmith preferred contextual ads, but hasn’t has much experience with video. Curt commented that video for automotive is a great way to share their assets (commercials). "It becomes a matter of thinking of Google and Yahoo! as ABC or NBC" and that new metrics are emerging to show the larger opportunity of integrated media. David beleives that marketers should take advantage of different search services to push their brands. He referenced Yahoo!’s search spolight award, where they were trying to “work and think creatively” with the users. This is the future, he said, and we own that together. David’s comments lead Peter to another question: ”We’re starting to push the boundaries of search, but as far as evolution is concerned - where is this coming from? Is it coming from the clients, or from the search engines, or is it from your own creative teams?
Peter thinks its coming from all of these. The panelists generally agreed, noting that because search is so “human in nature”, it works very similarly in all countries around the world.
Peter finished the session
by stating that new media is increasingly being optimized for search at
the same time that spam tactics continue to evolve. Though the engines
are doing a better job of filtering than ever before, the relevancy factor
will continue to need protections.
INTUIT & GOOGLE ANNOUNCE MAJOR SEARCH MARKETING PARTNERSHIP
Search Engine Watch, Greg Sterling, 09/13/06
In a development with potentially sweeping implications for local search and small business online marketing, Intuit has announced a partnership with Google that integrates AdWords campaign management and other Google-related features directly into the workflow of QuickBooks, the company's bestselling software package for small business. QuickBooks has 3.7 million active small business customers. A similar set of capabilities is contemplated for a future release of Intuit's other bestselling software program Quicken.
Simultaneously Intuit announced the acquisition of SME marketing firm StepUp. (Reuters is reporting that the acquisition price was $60 million.) StepUp has been doing for local retailers what local SEM/SEO firms like LocalLaunch, WebVisible and ReachLocal are doing (with partners) for local service businesses – helping them establish a web presence and pushing their listings and content out to consumer destinations where they could be found online. (I'll go into this aspect of the deal and its significance below.)
The Intuit-Google partnership and the QuickBooks implementation were quickly put together for the 2007 release of QuickBooks, which hits the shelves later this month. Both companies see their relationship as a long-term partnership with significant mutual benefits. Intuit CEO Steve Bennett and Google CEO Eric Schmidt are holding a conference call later today to explain the relationship in further detail.
Here are the details of the QuickBooks integration as I understand them:
AdWords Starter Edition Integration: Small businesses using QuickBooks will have the ability to sign up for AdWords and manage their campaigns directly within the QuickBooks workflow environment. They won't need to go to Google to do so; Google will receive a feed directly from within QuickBooks. As an incentive to advertise, new AdWords users will receive a $50 discount. Beyond FAQs and standard information about AdWords, right now there doesn't appear to be any "hand holding" or other special support. However I was told that additional features and support would come in future implementations. Intuit told me that they would be helping Google better understand and meet the needs of small business advertisers.
One-Click Listing on Google Maps: SME data contained within QuickBooks will pre-populate a set of fields to help SMEs upload their contact information and other details, which they have the ability to edit, in what amounts to one click to Google Maps. They will be enticed to do so with a message along these lines: "Get your business listed on Google for free."
Inventory/Product Feed to Google: StepUp has been working with Google to provide local retailer inventory information to Froogle. StepUp has about 5,000 small business customers. Being acquired by Intuit and integrated into QuickBooks will give the company overnight access to literally millions of small retailers and their inventory data. About half of QuickBooks' 3.7 million customers use the software for inventory management.
StepUp's application is similarly integrated into the new, 2007 version of QuickBooks. What this enables is a product/inventory data feed directly to Google/Froogle. As part of the install process of QuickBooks 2007 retailers will be given the option to list all their products on Google.
StepUp works with other distributors (e.g., SuperPages) and intends to continue doing so. "Our mission is to help retailers be found wherever consumers are," StepUp CEO Kendall Fargo told me in response to my question about whether the Intuit acquisition and Intuit-Google partnership would mean any changes in the company's roadmap or objectives. Beyond the additional reach this gives them, he said "no" and also expressed a desire to work with other partners (e.g., MSN, Yahoo!, etc.)
Google Desktop Integration: Finally the Google Desktop search application is being integrated into QuickBooks so that users can search their computers and the data in QuickBooks with the Google Desktop client.
Implications re Small Business Advertisers:
Google has been working directly and indirectly with channel partners to acquire small business advertisers. Many of those partners are yellow pages publishers. But consider that the U.S. yellow pages industry has approximately 3.2 million advertisers in total. As mentioned, QuickBooks has 3.7 million active users and Quicken another 3 million (not all of whom are small businesses obviously). But you get the idea: Instantly Google gets access – through a trusted third party (Intuit) -- to a huge installed base of potential advertisers.
The direct integration of AdWords into the QuickBooks workflow may not be as effective as a local sales rep. knocking on a door or making a phone call, but it gets close and it's considerably more efficient in many respects. And, as mentioned, Intuit will be helping Google to make AdWords more "SME friendly" going forward.
This is a privileged position with a massive SME aggregator that currently Google's competitors don't enjoy on a comparable scale.
Implications re the Consumer Experience:
The StepUp facilitated product inventory information, which will likely be more complete and accurate than almost anything else in the market, will make Froogle (or whatever it eventually becomes) a differentiated source of local product information ("Where can I buy it today?"). Intuit/StepUp has said it will work and hopes to work with others in providing this same information. So Froogle's competitors could potentially benefit from this feed if they build the required APIs.
The Google Maps integration will similarly provide (assuming that merchants opt for this) lots of accurate local content that otherwise wouldn't be available or might be outdated.
Of course it remains to be seen how all this plays out, but this is a major win for Google and a big value-add for Intuit in its relationship with small businesses.
SUIT FILED AGAINST AOL; SEEKS TO BLOCK SEARCH HISTORY STORAGE
TechCrunch, Marshall Kirkpatrick, 09/25/06
A class action lawsuit was filed in California today against AOL for last month’s disclosure of thousands of users’ search results. The suit (PDF) seeks no less than $1000 in damages per user effected and $4000 more per user in California. Privacy is cheap!
The most interesting part of the suit is that the plaintiffs seek to force AOL to stop storing search data all together. The suit also demands that user search data not appear in further search results and not be used for commercial or non-commercial purposes. Though this is probably an unrealistic demand to make, it’s also a broad attack on many of the most interesting developments on the web today. Our data is valuable, exposing it freely to the world without our permission is obviously a horrifying thought, but that valuable resource should be used for our benefit and according to our desires - not destroyed.
Filed in US District Court of Northern California, the suit was brought by three AOL users represented by the law firm Berman DeValerio Pease Tabacco Burt & Pucillo.